Reduce your time to increase your billable hours. Sounds like an oxymoron, right? In fact, it may not be, and in this post, we’ll explain why.
The death of the billable hour has been predicted for years, yet it’s still the go-to billing model for most lawyers worldwide. It’s easy to document, easy to understand, and well-established.
But clients today are more cost-sensitive and more likely to scrutinize and challenge bills for legal services. And they’re more aware of their options,
In this environment of rising client expectations, competitive advantage is increasingly important. Competition could come from other firms like yours, alternative service providers, or alternative billing models. According to a study conducted by legal finance specialist Burford, 70% of in-house lawyers agreed that “companies [who work with outside counsel] should take steps to manage legal costs such as moving away from the billable hour and limiting the firms they work with.”
And while reducing costs to the client may be a competitive necessity, it’s also a professional obligation. In Ontario, for example, the Rules of Professional Conduct, s. 3.1-1(e), states that a competent lawyer “means a lawyer who … perform[s] all functions conscientiously, diligently, and in a timely and cost-effective manner.” Lawyers have a professional duty to apply technology or other measures if they save the client money.
A Question of Health and Wellness?
Efficiency isn’t just a client imperative. It has implications for lawyers and other staff, too. It can affect productivity, job satisfaction, and your ability to attract and retain talent. Here are just three examples:
- Repetitive, low-complexity tasks that could be automated provide little job satisfaction. Law firm staff would rather spend time on tasks that draw on their legal expertise and experience.
- The focus on quantity over efficiency creates mental health issues, and remote work has exacerbated the problem. In a survey by The American Lawyer, one respondent said, “associates feel on-call at all hours [and the] billable model continues to incentivize quantity over quality of work.”
- Remuneration based on the number of hours worked can disproportionately affect caregivers who must balance care for children or other family members with work. “While this needn’t just mean women lawyers, women remain primary caregivers and so are especially subject to the need for efficiency in balancing caregiver responsibilities with work,” says Burford.
Not All Billable Hours Are Profitable
Maximizing billable hours can be a reasonable goal if done efficiently, but it’s incomplete unless it accounts for profitability. In a comprehensive article about profitability metrics, Affinity Consulting highlights realization rate, the measure of fees collected as a percentage of fees recorded. They suggest that “every lawyer should aspire to realize 100 percent of their billable time”, and that anything less could indicate productivity challenges.
Affinity believes many of the obstacles to full realization find their sources in a firm’s technology (or lack of it). Errors that cause rework or duplicate efforts, such as continual rekeying of data, can reduce the profit per billable hour. As Affinity says, “having inadequate technology can affect the quality of the services delivered to the law firm’s clients. Mistakes caused by a failure to automate documents are a perfect example. As is duplicative work where there is no workflow supported by a robust case management system.”
Much has been written about the “death of the billable hour”, but its demise is far from imminent. So, if it’s here to stay, how do we address its shortcomings? Start by considering efficiency as a way to compete for new clients and new hires. Maximizing productivity will help you grow your business, attract and retain talent, and maximize your billable hours – profitably.
About Michael Sauber
Michael Sauber leads the marketing program for Korbitec, producer of Automated Civil Litigation Software (ACL). He has worked with document production technologies and professional services for over 30 years and is a frequent blogger on these topics.